By Summer Zhen
HONG KONG (Reuters) – Hong Kong’s securities regulator finalised its guidelines on confidential information communications ahead of share placements and large securities transactions known as block trades after collecting industry feedback.
The new rules, which will become effective on May 2, 2025, detail the procedures by which brokers disclose confidential information to investors to gauge buying interest before transactions, the Securities and Futures Commission (SFC) said in a statement late on Thursday.
The introduction of the guidelines come as the Asia financial centre’s securities watchdog has tightened scrutiny over insider trading and recently commenced high profile criminal proceedings against Hong Kong hedge fund Segantii Capital Management, its founder and a former trader for alleged insider dealing.
Segantii was a major participant in block trading in Asia, which typically involve large transactions of at least tens of thousands of shares.
“The guidelines aim to address market integrity issues related to the abuse of confidential information entrusted by a client in the course of market sounding, resulting in an unfair playing field,” said Julia Leung, the SFC’s chief executive officer.
The initial draft of the guidelines faced push back from hedge funds and market participants for its wide scope.
The final version of the rules will be officially published on Nov. 1 and narrowed the scope of application, the statement said.
Only confidential information that “is entrusted by a client, an issuer or an existing shareholder selling or buying in the secondary market” will be applicable, instead of the previous proposal that covers any non-public information, according to a SFC statement with the conclusions reached from its consultations with the public released alongside the guidelines announcement.
The SFC also amended the guidelines to focus on listed shares and other securities “likely to materially affect the price of shares that are listed on an exchange”.
Kher Sheng Lee, Asia-Pacific co-head of the Alternative Investment Management Association (AIMA), a hedge fund lobby group, said the SFC listened to industry concerns and “balanced regulatory integrity with industry practicality”.
(Reporting by Summer Zhen; Editing by Christian Schmollinger)
